Distressed Irish bank selling Vantage Properties loan

New York /
Dec.December 13, 2010 03:50 PM

Ailing Anglo Irish Bank underwrote hundreds of millions of dollars in real estate debt in New York during
the boom and is now unloading a $51.5 million mortgage secured by a package of apartment buildings
in Upper Manhattan, owned by Vantage Properties.

Anglo Irish, based in Dublin, is in financial distress after billions of dollars in global real estate loans went
bad. Ireland’s central bank reported last month that the bank, which provided financing for projects
such as the Apthorp and 225 Rector Street, is winding down operations. A
representative of the New York office said the bank declined to comment.

The Vantage Properties loan is being marketed by investment sales firm Massey Knakal Realty Services.
Company CEO Robert Knakal declined to comment on the offering, but said in this week’s edition of
Insights from The Real Deal that currently demand for note sales is higher than for actual properties (see
video above).

The Vantage loan was being offered for the face value of the unpaid balance of the loan. Marketing
materials distributed earlier this month by Massey Knakal, and obtained by The Real Deal, said the note
was performing as of November.

The sale of the note highlights the wide variety of loans that are on the market and the complexity of
selling them. Loan sales now make up an ever growing proportion of commercial transactions, yet the
market remains shrouded in secrecy because note sales are rarely recorded in government records and
both the lenders and borrowers often don’t want the offering made public because acknowledging a
property is in distress can further reduce values.

The 474-unit Vantage Properties note, secured by buildings such as 90 Ellwood Street in Fort George and
248 Sherman Avenue in Inwood, has 414 rent-stabilized units and estimated annual gross revenue of
$5.5 million, the marketing materials say.

Neil Rubler, president and CEO of Vantage Properties, declined to comment via e-mail, but added
that, “I also can’t comment on our interest in buying the note, as it’s our policy not to discuss acquisition
efforts.”

Massey Knakal is active in the Bronx as well, marketing two purchase options on notes for major
properties there. The firm is offering an option to buy the $36.5 million note secured by two buildings
with 490 units — Robert Fulton Terrace at 530-540 East 169th Street in Morrisania and Fordham
Towers at 480 East 188th Street in Belmont. Those properties, purchased by a group of investors led by
Mark Karasick in 2007, are
being foreclosed on by special servicer LNR Partners.

The other Bronx asset is a $35 million loan in foreclosure controlled by LNR, that is secured by 10
buildings
owned by Milbank Real Estate.

The Milbank portfolio has attracted particular scrutiny from the city and housing advocates who believe
the loan is too high for the 531-unit property, which has estimated gross revenues of $5.9 million for
2010, the marketing materials say. The properties are plagued by housing code violations, with a total of
4,372 in the 10 properties, city officials said.

In fact, today Department of Housing Preservation and Development Commissioner Raphael Cestero
announced subpoenas to order executives of Milbank and LNR Partners to appear at HPD’s offices in
January to discuss the Bronx properties.

Knakal, in his interview with Insights from The Real Deal conducted before the subpoena was
announced, said owners were not deterred by housing advocates.

“Buyers have to have a lot of intestinal fortitude to deal with properties that have rent-regulated
tenants in them from the beginning, so a little bit of pressure from housing advocates doesn’t really
dissuade investors,” he said.

Knakal said activity on note sales was high.

“I would say on the notes we have sold this year, where the collateral has been Manhattan-based
properties, we have gotten a minimum of 50 offers,” he said.

Harold Shultz, senior fellow at the non-profit research center Citizens Housing and Planning Council, said
lenders and special servicers in many cases have been reluctant to sell notes, because they have to mark
down their value.

“But presumably they can’t hold on to them forever. Perhaps this is the beginning of the big sell off,” he
said.


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